Local councils may also be allowed to restrict the number of private hire cars and to require testing of private hire drivers on their knowledge of an area.

The current licensing scheme could also be extended to cover businesses operating with fewer than four cars and without any offices.

The taxi and private hire sectors are very important to the Scottish economy

Justice Secretary Kenny MacAskill

Police have previously warned at least 15 Scottish taxi firms are used as a cover for drug trafficking, prostitution and money-laundering.

The private hire trade, particularly in Glasgow, has long been linked with organised crime with figures such as the late Tam McGraw one of the first to realise the need to hide his cash.

Jamie Stevenson, jailed for almost 13 years in 2007 over a money-laundering scheme, also held a taxi operator’s licence with a fleet of cars.

Justice Secretary Kenny MacAskill said: “While the vast majority of taxi firms operate within the law, this will also address the influence of criminal groups and individuals within the taxi and private hire trades.

“The taxi and private hire sectors are very important to the Scottish economy and it is essential that they are regulated to the appropriate standards, so that the public is protected from harm.”

Bill McIntosh, of the Scottish Taxi Federation, welcomed the consultation, saying the organisation had “long been calling for changes to the licensing regime”.

He said: “Passengers will want to know that they are being served by responsible businesses, and taxi firms and drivers also need more protection from rogue elements, and assurance that the licensing regime is consistent in its

aims.”

It comes just months after Detective Chief Inspector Ronnie Megaughin, head of interventions at the Scottish Crime and Drug Enforcement Agency, said that licensing currently controlled by local authorities needed to be carried out by specialists to root out organised criminals.